In a development that is likely to hit telecommunications companies, the Department of Telecommunications (DoT) is understood to have decided to postpone any decision on grant of second generation (2G) spectrum or radio frequency till a final decision on the 3G spectrum allocation is arrived at.

A meeting between the communications minister A Raja and finance minister Pranab Mukherjee on Tuesday ended without a consensus being arrived at and the key issues in the auction of 3G spectrum like the base price and number of players to be accommodated in every circle remain unresolved.

The reason for postponing the 2G auction is that the spectrum panel that was constituted earlier to make suggestions on process of allocating 2G spectrum has recommended that in its report submitted last month that the spectrum should be allocated through internationally accepted auction system. Also, it recommended that the pricing of the spectrum should be market dictated and the base price can be linked with the 3G auction base price.

In this case, it becomes difficult for the DoT to go ahead with any spectrum allocation till the 3G policy is finalised. Also, the telecom ministry, after severe criticism of its 2G spectrum allocation in the previous term of the UPA government, is looking to avoid any further criticism and wants to be clear on the policy front first. However, the development may hit operations of the telcos as additional spectrum is necessary for players to continue providing good quality services to additional subscribers. Although more subscribers can be served with existing spectrum, it takes much more capital expenditure and latest technology to do so and despite that there would be some upper limit to which subscribers can be added with given amount of spectrum.

The move will not only hit existing large players which are waiting for additional spectrum, but also the smaller players and new entrants like Datacom, Unitech and Swan Telecom etc which are awaiting start-up spectrum in many circles.